Lee Robertson: Time to move on from independent versus restricted debate

So it appears the move towards restricted is gathering a fair bit of pace, with the news more firms are being snapped up by larger, life assurance company-backed wealth managers, among others. Many of these are excellent firms too: chartered, profitable, award winning and highly admired.

The cost pressures of being regulated – including the Financial Services Compensation Scheme levy, client acquisition and the pressure to keep fees as they are or even cheaper year after year – all add up. With this in mind, I can quite understand why firms are making the decision to sell out to larger operators.

Despite promises to look seriously at reform, the FSCS levy pretty much means that advisers have no control over the cost of operating in the regulated sector. Most advisory firms run lean already, with little fat to guard against large and unwelcome bills. According to research by Apfa, while turnover is up for most firms, profitability is shrinking for many. I am sure that it is not as simple as its statement that it is all down to the FSCS levy but it is bound to be impacting to a fair degree for most firms.

While much of our sector may have a vague uneasiness at the shrinking number of independent financial advisers around, I wonder if it really is such a big problem as the industry moves on post-RDR.

Increased due diligence standards and the desire of most business owners to ensure they have a robust, repeatable investment process that leads to defined outcomes for clients has led to many narrowing their proposition to a clearly defined centralised investment proposition in any case.

As more advisers have either outsourced their investment management, taken it all in house or come to some sort of hybrid arrangement, many look less like the old independent financial adviser we knew so well.

Some believe that the term independent became somewhat tarnished pre-RDR and actively distanced themselves from it. Others battle on with the term and continue to deliver excellent financial advice to their clients.

But does it really matter now? Should we just give up on the restricted versus independent debate? Surely professional financial advice that assists the general public with their financial problems and issues and objectives should be the most dominant aim.

My only real concern is that too few large players end up dominating the market and somehow we as a sector, against all the best intentions of those entering into arrangements with the consolidators, revert to a large company, with an at best average standard of advice. The investing public deserve better.

“professional financial advice that assists the general public with their financial problems and issues and objectives should be the most dominant aim.” Absolutely correct and this can’t be achieved without absolute independence. How can you achieve this if you back yourself into a corner? I would go further. You are not truly independent unless you are free to set your own tariff as well as being unfettered by self imposed limitations.

Those that keep the faith will reap the rewards as those with sense understand only too well the differences.